Question

The following financial statements and additional information are reported.

IKIBAN INC. Comparative Balance Sheets June 30, 2015 and 2014
	2015				2014
Assets
Cash	$	114,400			$	66,300
Accounts receivable, net		70,000				51,900
Inventory		65,900				96,600
Prepaid expenses		4,700				6,100
Total current assets		255,000				220,900
Equipment		124,700				114,000
Accum. depreciation—Equipment		(28,800	)			(10,400	)
Total assets	$	350,900			$	324,500
Liabilities and Equity
Accounts payable	$	26,300			$	32,700
Wages payable		7,900				16,300
Income taxes payable		2,700				4,400
Total current liabilities		36,900				53,400
Notes payable (long term)		55,000				75,000
Total liabilities		91,900				128,400
Equity
Common stock, $5 par value		234,000				188,000
Retained earnings		25,000				8,100
Total liabilities and equity	$	350,900			$	324,500

     

IKIBAN INC. Income Statement For Year Ended June 30, 2015
Sales				$	670,000
Cost of goods sold					408,000
Gross profit					262,000
Operating expenses
Depreciation expense	$	58,300
Other expenses		66,600
Total operating expenses					124,900
					137,100
Other gains (losses)
Gain on sale of equipment					2,700
Income before taxes					139,800
Income taxes expense					55,920
Net income				$	83,880

     

Additional Information

a.	A $20,000 note payable is retired at its $20,000 carrying (book) value in exchange for cash.
b.	The only changes affecting retained earnings are net income and cash dividends paid.
c.	New equipment is acquired for $59,900 cash.
d.	Received cash for the sale of equipment that had cost $49,200, yielding a $2,700 gain.
e.	Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
	f.All purchases and sales of inventory are on credit. (1) Compute the company's cash flow on total assets ratio for its fiscal year 2015.

Answer 1

IKIBAN INC
Statement of Cash Flows
For the Year Ended June 30, 2015
Cash flows from operating activities
Net Income		$    83,880
Adjustments to reconcile net income to :
Depreciation expense	$   58,300
Gain on sale of equipment	$   (2,700)
Increase in accounts receivable	$ (18,100)		51900-70000
Decrease in inventory	$   30,700		96600-65900
Decrease in prepaid expenses	$      1,400		6100-4700
Decrease in accounts payable	$   (6,400)		26300-32700
Decrease in wages payable	$   (8,400)		7900-16300
Decrease in income tax payable	$   (1,700)		2700-4400
		$    53,100
Net cash provided by operating activities		$ 136,980
Cash flows from investing activities
Cash received from sale of equipment	$   12,000		49200-(10400+58300-28800)+2700
Cash paid for sale of equipment	$ (59,900)
Net cash used by investing activities		$ (47,900)
Cash flows from financing activities
Cash paid as dividend	$ (66,980)		25000-8100-83880
Cash paid for retire notes	$ (20,000)
Cash received from issuance of common stock	$   46,000		234000-188000
Net cash used by financing activities		$ (40,980)
Net Increase in cash and cash equivalents		$    48,100
Cash and cash equivalents at beginning of period		$    66,300
Cash and cash equivalents at end of period		$ 114,400

Cash flow on total assets ratio = Cash flow from operating activities / Average total assets

Cash flow on total assets ratio = $136,980 / (($350,900+$324,500)/2)

Cash flow on total assets ratio = 40.56%